PAIN CENTER OF SE INDIANA, LLC et al v. ORIGIN HEALTHCARE SOLUTIONS LLC et al

Filing 158

ORDER granting in part and denying in part Defendant Origin's 72 Motion for Judgment on the Pleadings. Signed by Judge Richard L. Young on 12/1/2014. (TMD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

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PAIN CENTER OF SE INDIANA, LLC,
INDIANA PAIN MEDICINE AND
REHABILITATION CENTER, P.C., and
ANTHONY ALEXANDER, M.D.
Plaintiffs,
vs.
ORIGIN HEALTHCARE SOLUTIONS
LLC,
SSIMED, LLC, and
ORIGIN HOLDINGS, INC.,
Defendants.

1:13-cv-00133-RLY-DKL

ENTRY ON DEFENDANTS’ MOTION FOR PARTIAL JUDGMENT ON THE
PLEADINGS
Plaintiffs, Pain Center of SE Indiana, LLC, The Pain Medicine and Rehabilitation
Center, P.C., and Anthony Alexander, M.D. (collectively referred to as “Plaintiffs”),
operated a privately-owned outpatient medical clinic in Seymour, Indiana. This case
arises out of certain medical practice software Plaintiffs purchased from Defendants,
Origin Healthcare Solutions LLC; SSIMED (d/b/a SSIMED Holding, LLC); and Origin
Holdings, Inc. (collectively, “Origin”). Plaintiffs allege Origin personnel fraudulently
induced Plaintiffs to purchase the software, and fraudulently misrepresented the quality,
character, and other pertinent facts regarding its support services and software.
Defendants now move to dismiss Counts I, II, V, VII, VIII, IX, XI, XII, and XIII of
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Plaintiffs’ First Amended Complaint under Rule 12(c) of the Federal Rules of Civil
Procedure. For the reasons set forth below, the motion is GRANTED in part, and
DENIED in part.
I.

Background
According to the First Amended Complaint (“Amended Complaint”), SSIMED

was established in 1991 as an electronic health record vendor and provider of physician
software and services. (Am. Compl. ¶ 14.) The software was directed at medical claim
coding, patient appointment tracking, and medical insurance billing. (Id.) Plaintiffs
allege that, due to a SSIMED sales representative’s misrepresentations, Plaintiffs entered
into a contract to purchase the “SSIMED Practice Manager Suite: including Practice
Manager and Scheduler” in June 2003. (Id. at ¶¶ 30-35.) Plaintiffs allege they were
falsely assured that SSIMED had installed dozens of these systems without error,
installing this new program was less expensive than maintaining their current software,
the software and services would prevent any problems with claim reimbursements, the
software would be adequately maintained, the users would be trained, and the
representatives and relevant support staff had been extensively trained. (Id.) At some
later point, Origin Healthcare Solutions assumed the contracts as successors-in-interest to
SSIMED. (Id. at ¶ 17.)
Shortly after entering into the agreement, the software began exhibiting errors,
which Plaintiffs claim they were unaware of at the time. (Id. at ¶ 38.) However, Plaintiffs
began noticing they had not received anticipated revenues from third party payors,
including Medicaid, Medicare, and various insurance companies, despite having
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presented claims through the new software. (Id. at ¶ 39.) Origin’s staff indicated that the
problems were due to the insurance companies’ decisions to decline the submitted bills.
(Id. at ¶ 40.) Plaintiffs allege the claims were never actually presented to the insurance
companies, which was hard for them to discover because of the difficulty of separating
single claim errors from the submissions of millions of bundled claims that were
transferred at once in batch files. (Id.) Plaintiffs claim these problems were exacerbated
by Origin’s inadequate training of users and employees. (Id. at ¶ 43.)
Around November 2006, an Origin sales representative told Plaintiffs its product
“EMRge” would allow for expedient billing reimbursement and patient record
management that would upgrade Plaintiffs’ current system. (Id. at ¶ 46.) Plaintiffs allege
Origin stated “EMRge” was specifically designed to work with “Practice Manager” and
would eliminate past inconveniences that occurred because it was using different clinical
data software. (Id.) Origin further stated this package did not have “glitches” that would
result in bills not being properly submitted to the insurance companies. (Id. at ¶ 47.)
Origin assured Plaintiffs that even if such problems were to occur, the software had the
capacity to prevent and/or rectify such problems and the adequately trained support staff
would prevent losses from occurring. (Id.)
In addition, Plaintiffs allege they learned through an Origin employee that Origin
had possession of Plaintiffs’ submission histories, and failed to inform Plaintiffs of the
fact that over a 10-year period, Plaintiffs’ report generated only $21.9 million despite
clinical visit numbers which justified well in excess of $30-36 million. (Id. at ¶ 60.) As a

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result of the severe shortfall in claims reimbursements, Plaintiffs were forced to borrow
from banks and friends to cover financial obligations. (Id. at ¶ 70.)
Plaintiffs’ 48-page Amended Complaint against Origin consists of thirteen Counts,
including counts for fraud (Count I), fraud in the inducement (Count II), unjust
enrichment (Count V), fraudulent misrepresentation (Count VII), negligent
misrepresentation (Count VIII), intentional infliction of emotional distress (Count IX),
tortious interference with a business relationship (Count XI), negligence (Count XII), and
a Lanham Act claim (Count XIII).
All other allegations necessary to the court’s decision will be addressed in the
Discussion Section.
II.

Dismissal Standard
A motion for judgment on the pleadings under Federal Rule of Civil Procedure

12(c) is evaluated under the same standard of review as a 12(b)(6) motion. Pisciotta v.
Old Nat’l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007). To survive a motion to dismiss,
“the complaint need only contain a ‘short and plain statement of the claim showing that
the pleader is entitled to relief.’” EEOC v. Concentra Health Servs., 496 F.3d 773, 776
(7th Cir. 2007) (quoting Rule 8(a)(2)). In ruling on a motion to dismiss, the court
construes the allegations of the complaint in the light most favorable to the plaintiff, and
all well-pleaded, nonconclusory, factual allegations in the complaint are accepted as true.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A motion to dismiss should be granted if the
plaintiff fails to proffer “enough facts to state a claim that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007). A claim has facial plausibility “when
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the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 663.
Asking for plausible grounds does not impose a probability requirement at the
pleading stage; instead, it requires the plaintiff to plead enough facts to raise a reasonable
expectation that discovery will reveal evidence of the allegation. Twombly, 550 U.S. at
545. The need at the pleading stage for plausible allegations reflects Rule 8(a)(2)’s
threshold requirement that the “plain statement” possess enough heft to “sho[w] that the
pleader is entitled to relief.” Id.
III.

Discussion
As noted previously, Defendants move to dismiss eight state law tort claims

asserted in Counts I, II, V, VII, VIII, IX, XI, and XII, and one federal claim asserted in
Count XIII. Indiana law governs Plaintiffs’ state law claims. The court will begin its
discussion with Plaintiffs’ fraud claim.
A. Count I, Fraud
1. Actual Fraud
To establish actual fraud under Indiana law, a plaintiff must show there is: (1) a
material misrepresentation of past or existing fact (2) made with knowledge of or reckless
disregard for the falsity of the statement, and (3) the misrepresentation is relied upon to
the detriment of the relying party. Schott v. Huntington Nat. Bank, No. 1:12-cv-430,
2012 WL 6725902, at *7 (S.D. Ind. Dec. 27, 2012) (citing Colonial Penn Ins. Co. v.
Guzorek, 690 N.E.2d 664, 675 (Ind. 1997)). When a plaintiff alleges fraud, she must
“state with particularity the circumstances constituting fraud . . . Malice, intent,
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knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R.
Civ. P. 9(b). The Rule requires a plaintiff to allege a “general outline” of the alleged
fraud that would “reasonably notify the defendants of their purported role in the scheme.”
Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1020 (7th Cir. 1992).
A plaintiff asserting fraud must perform a “pre-complaint investigation to assure
that the claim is responsible and supported, rather than defamatory and extortionate.”
Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007).
Consequently, the complaint must demonstrate the “who, what, when, where, and how”
of the fraud. Id. Specifically, the complaint must state “the identity of the person who
made the representation, the time, place, and content of the misrepresentation, and the
method by which the misrepresentation was communicated to the plaintiff.” Windy City
Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 563 F.3d 663, 668 (7th
Cir. 2008). The requirements will be somewhat tempered, however, when a plaintiff
“does not have access to all the facts necessary to provide details, such as when those
facts are within the exclusive knowledge of the defendant.” Hirata Corp. v. J.B. Oxford
and Co., 193 F.R.D. 589, 592 (S.D. Ind. 2000).
Here, Plaintiffs assert the following allegations to support their claim of fraud: (1)
Origin representatives intentionally and materially made misleading representations
regarding the characteristics and services associated with Origin software prior to signing
contracts in 2003 and 2006; (2) Origin knew the representations were false when it made
them, or it made them with reckless disregard for their truth or falsity; and (3) Plaintiffs
relied on Origin’s representations to their detriment, suffering substantial pecuniary loss
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including economic and non-economic damages and additional damages. (Am. Compl. ¶¶
73-79.) Origin argues that this is not enough, as Plaintiffs failed to satisfy the “who,
when, where, and how” required by Rule 9(b) to maintain a cause of action for fraud.
The court disagrees.
Plaintiffs generally identify the “who” as Origin representatives. Identification of
the individual employee is not necessary at this time because “institutional identifications
meet the Rule 9(b) standard.” MDG Int’l, Inc. v. Australian Gold, Inc., No. 1:07-cv-1096,
2008 WL 3982072, at *3 (S.D. Ind. Aug. 22, 2008) (citing Blaz v. Michael Reese Hosp.
Found., 191 F.R.D. 570, 574 (N.D. Ill. 1999) (finding the institutional identity of the
caller is what matters, not the individual employee, so plaintiff sufficiently pled the
“who” requirement of Rule 9(b))). Further, “Exhibit A” identifies Joy King/Long as the
sales representative. See Fed. R. Civ. P. 20(c) (written instrument that is an exhibit to the
pleading is part of pleading for all purposes). Thus, the “who” requirement is satisfied.
Plaintiffs also allege when Origin’s misrepresentations were made, i.e., during the
periods of June 2003 and November 2006 (Am. Compl. ¶¶ 29-35; 46-51). Therefore, the
Defendants have been provided sufficient notice as to when the misrepresentations
occurred. Hefferman v. Bass, 467 F.3d 596, 601 (7th Cir. 2006) (allegations that
misrepresentation occurred “sometime in late August or early September 2003” satisfied
Rule9(b)); Comentis, Inc. v. Purdue Research Found., 765 F. Supp. 2d 1092, 1110 (N.D.
Ind. 2011) (“in or about February 2009” provided sufficient detail under Rule 9(b));
Greer v. Advanced Equities, Inc., 683 F. Supp. 2d 761, 772 (N.D. Ill. 2010) (“the ‘fall of
1999’ or ‘November 1999’ is specific enough under Rule 9(b)”). Again, the exhibits
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provide further specificity as to the dates of those representations. As such, the Plaintiffs
also met the “when” requirement.
Lastly, Plaintiffs allege the “how” and “where” the alleged misrepresentations
were made. Specifically, the “how” was Origin making affirmative misrepresentations,
and the “where” was the business presentation at Plaintiffs’ principal place of business.
(Am. Compl. ¶¶ 30-31; 464-7.); Methodist Hosps., Inc. v. FTI Cambio, No. 2:11-cv-36
*2 (N.D. Ind. Dec. 5, 2011) (finding the plaintiff alleging a “sales presentation in July
2007” was sufficient for the “where” requirement of fraud, and “making affirmative
representations” was sufficient for the “how” for the purposes of Rule 9(b)). Thus, the
final elements of fraud are met. As a result, Defendant’s motion for partial judgment on
the pleadings for actual fraud is DENIED.
b. Constructive Fraud
Count I can also be construed as alleging a claim for constructive fraud. To state a
claim for constructive fraud, Indiana law requires plaintiff to prove: (1) a duty owing by
the party to be charged to the complaining party due to their relationship; (2) violation of
that duty by the making of deceptive material misrepresentations of past or existing facts
or remaining silent when a duty to speak exists; (3) reliance thereon by the complaining
party; (4) injury to the complaining party as a proximate result thereof; and (5) the
gaining of an advantage by the party to be charged at the expense of the complaining
party. Rice v. Strunk, 670 N.E.2d 1280, 1284 (Ind. 1996). Duty in constructive fraud
only exists where there is a fiduciary relationship. Mullen v. Cogdell, 643 N.E.2d 390,
401 (Ind. Ct. App. 1994).
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Plaintiffs allege: (1) such a duty exists between the parties based upon a buyerseller relationship; (2) only Origin was aware of what it made and how it was made; (3)
Plaintiffs relied on the sales representative’s professed knowledge of the truth of the
statements, given they did not possess such knowledge; (4) Plaintiffs were harmed as a
result; and (5) Origin received the benefit of payment for the software and support as a
result. (Am. Compl. ¶¶ 29-35; 46-51.)
Origin argues that the first element is not met due to the absence of a confidential
relationship. However, under Indiana law, in the absence of a confidential relationship,
constructive fraud may arise in the buyer-seller context where one party may possess
knowledge not possessed by the other and may thereby enjoy a position of superiority
over the other. Mullen, 643 N.E.2d at 401. Thus, constructive fraud exists where: (1) a
seller makes unqualified statements in order to induce another to make a purchase; (2) the
buyer relies upon the statements; and (3) the seller has professed to the buyer that he has
knowledge of the truth of the statements. Scott v. Bodor, Inc., 571 N.E.2d 313, 324 (Ind.
Ct. App. 1991).
Plaintiffs allege (1) Origin made false representations about its software and
services that it was unqualified to make; (2) Plaintiffs relied on Origin’s statements
because they did not possess such knowledge; and (3) Origin professed knowledge of the
truth of those statements. (Am. Compl. ¶¶ 29-35; 46-51). Further, Plaintiffs allege they
were injured as a result of their reliance on Origin’s statements. Id. Thus, Plaintiffs
adequately pled the elements for constructive fraud. Accordingly, Origin’s motion for
partial judgment on the pleadings as to Plaintiffs’ constructive fraud claim is DENIED.
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B. Count II, Fraud in the Inducement
“Fraudulent inducement occurs when a party is induced through fraudulent
misrepresentations to enter into a contract.” Lightning Litho, Inc. v. Danka Indus., Inc.,
776 N.E.2d 1238, 1241 (Ind. Ct. App. 2002). Unlike actual or constructive fraud, a
plaintiff who prevails on a claim for fraud in the inducement must elect between two
remedies: either rescind the contract, return any benefits received, and be returned to the
status quo, or affirm the contract, retain the benefits, and seek damages. Id. The
elements for fraud in the inducement, however, are the same elements as in actual fraud.
Tru-Cal, Inc. v. Conrad Kacsik Instrument Sys., Inc., 905 N.E.2d 40, 44-45 (Ind. Ct. App.
2009).
The allegations supportive of Plaintiffs’ fraudulent inducement claim are
remarkably similar to those set forth in Count I. Accordingly, the court finds Plaintiffs
have also met the heightened pleading requirements for fraud in the inducement. (Am.
Compl. ¶¶ 83-93.) Thus, Origin’s motion for partial judgment on the pleadings on
Plaintiffs’ claim of fraud in the inducement is DENIED.
C. Count V, Unjust Enrichment
Unjust enrichment is often referred to as quantum meruit, contract implied-in-law,
constructive contract, or quasi-contract, and it requires a party “who has been unjustly
enriched at another’s expense to make restitution to the aggrieved party.” Bayh v.
Sonnenburg, 573 N.E.2d 398, 408 (Ind. 1991). To prevail on an unjust enrichment claim,
a plaintiff must generally show: (1) he rendered a benefit to the defendant at the
defendant’s express or implied request, (2) the plaintiff expected payment from the
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defendant, and (3) allowing the defendant to retain the benefit without restitution would
be unjust. Reed v. Reid, 980 N.E.2d 277, 296 (Ind. 2012) (citing Bayh, 573 N.E.2d at
408)).
When there is an express contract, recovery cannot be based on a theory implied
in law, such as unjust enrichment, for two reasons: “(1) a contract provides a remedy at
law; and (2) as a remnant of chancery procedure, a plaintiff may not pursue an equitable
remedy when there is a remedy at law.” Coppolillo v. Cort, 947 N.E.2d 994, 997 (Ind. Ct.
App. 2011). Recently, the Indiana Court of Appeals noted an exception to that rule –
“when an express contract does not fully address a subject, a court of equity may impose
a remedy to further the ends of justice.” Id. See also Kohl’s Indiana L.P. v. Owens, 979
N.E.2d 159, 168 (Ind. Ct. App. 2012) (same).
Here, Plaintiffs allege:
113. Plaintiffs’ payments to Origin were a specific benefit conferred upon
Origin.
114. The acceptance and retention by Origin of the benefit conferred on it
were under such circumstances that it would be inequitable for Origin to
retain the benefit, because Origin was unjustly enriched by Plaintiffs’
payments in connection with Origin’s software and services.
115. As a direct and proximate result of Origin’s conduct, Plaintiff’s [sic]
seeks reimbursement in an amount to be proven at Trial.
(Am. Compl. ¶¶ 111-114.)
The parties’ express agreements fully address the subject of Plaintiffs’ payment
obligations and Origin’s software and support service obligations. Plaintiffs’ argument
that they allege conduct that is beyond the contract – “several examples of fraudulent
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conduct on the part of Defendants who retained Plaintiffs’ payments despite its conduct
and the injustice of such retention”— is misplaced. That conduct actually falls within the
scope of the parties’ agreements, as Origin only received payments from Plaintiffs as
provided in their agreements. Moreover, Plaintiffs have pursued relief for Origin’s
alleged fraud through their other tort claims. Therefore, Origin’s motion for partial
judgment on the pleadings on Plaintiff’s claim of unjust enrichment is GRANTED.
D. Count VII, Fraudulent Misrepresentation
A claim for fraudulent misrepresentation, just as a claim for fraud in the
inducement, has the same elements as actual fraud. Even though Plaintiffs’ claim is
entitled Fraudulent Misrepresentation, which also happens to be one of the essential
elements of a claim for fraud, the court finds Plaintiffs adequately set forth factual
allegations sufficient to state a claim for fraud1. Thus, Origin’s motion for partial
judgment on the pleadings is DENIED.
E. Count VIII, Negligent Misrepresentation
A claim for negligent misrepresentation requires a plaintiff to establish that:
(1) The defendant, in the course of his business, profession, or employment,
or in any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions;
(2) the defendant fails to exercise reasonable care or competence in obtaining
or communicating the information;

1

 As a side note, Origin maintains that Plaintiffs’ fraud claims asserted in Counts I, II, and

VII are duplicative and should therefore be dismissed. The court has found Plaintiffs adequately
state claims for relief. Thus, a motion to dismiss is improper. The appropriate motion in such a
circumstance is a motion to strike under Rule 12(f).

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(3) the plaintiff justifiably relies upon the information supplied by the
defendant; and
(4) the plaintiff suffers pecuniary loss as a result.
Harrison Mfg., LLC v. Bienias, No. 4:11-cv-65, 2013 WL 6486668, at *6 (S.D. Ind.
Dec. 10, 2013).
Plaintiffs allege that “[d]uring the time the Plaintiffs were engaged with Origin
under both Agreements,” Origin made negligent material misrepresentations to Plaintiffs
regarding the Origin software that it was selling to Plaintiffs, including, but not limited
to, the software’s functional capacity, and its ability to adequately receive
Medicare/Medicaid reimbursements. (Am. Compl. ¶ 129.) Plaintiffs further allege that
Origin “also failed to disclose that it was never positioned to resolve Plaintiffs’ technical
issues as they arose.” (Id.) These misrepresentations were made “with carelessness and
with no reasonable basis that it [sic] is true in order to induce Plaintiffs to rely on the
representations for Origin’s own pecuniary benefit.” (Am. Compl. ¶¶ 129-131.)
Plaintiffs allege they were thus induced to enter into the agreements, and they continued
their business relationship with Origin based on their reasonable reliance on Origin’s
representations. (Id. at ¶ 132.) Consequently, Plaintiffs suffered substantial pecuniary
loss, including economic and non-economic damages. (Id.)
“[T]he condition of Indiana law regarding the tort of negligent misrepresentation
has been aptly described as ‘relative chaos.’” Thomas v. Lewis Eng’g, Inc. 848 N.E.2d
758, 760 (Ind. Ct. App. 2006) (citations omitted). The tort was originally limited to the
employer-employee relationship, Eby v. York-Division, Borg-Warner, 455 N.E.2d 623
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(Ind. Ct. App. 1983), but has since been expanded to include those whose profession
includes the giving of opinions. U.S. Bank, N.A. v. Integrity Land Title Corp., 929
N.E.2d 742, 747 (Ind. Ct. App. 2010). The class of professionals who could be subject to
a negligent misrepresentation claim includes, but is not limited to, “brokers, attorneys,
abstractors, and surveyors.” Jeffrey v. Methodist Hosps., 956 N.E.2d 151, 156 n. 7 (Ind.
Ct. App. 2011) (declining to limit the class of professionals to brokers, attorneys,
abstractors, and surveyors); see also Eby, 455 N.E.2d at 629 (defining professionals as
“one whose primary function is to render actionable professional opinions”).
The court finds Plaintiffs have not alleged a claim for negligent misrepresentation
for two reasons. First, Origin staff members were not “professionals,” because their
representations regarding the qualities and functions of the software were not the type of
professional opinions that are actionable. Instead, its relationship with Plaintiffs was one
of salesperson-customer and support staff-customer. Indeed, Plaintiffs allege
misrepresentations of fact, not of opinion. Accordingly, Origin’s motion for partial
judgment on the pleadings on Plaintiff’s claim of negligent misrepresentation is
GRANTED.
F. Count IX, Intentional Infliction of Emotional Distress
To establish a claim of intentional infliction of emotional distress, a plaintiff must
allege that Origin: (1) engaged in extreme and outrageous conduct (2) which intentionally
or recklessly (3) caused (4) severe emotional distress to another.” Curry v. Whitaker, 943
N.E.2d 354, 361 (Ind. Ct. App. 2011). It is the intent to harm the plaintiff emotionally

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that constitutes the basis of the tort, and the requirement to prove the elements of the tort
are rigorous. Id. This claim is brought only by Dr. Alexander.
Dr. Alexander alleges he was deprived of Medicaid incentive payments and claims
reimbursements due to Origin’s software and inept support staff, and that when Dr.
Alexander and his staff confronted Origin “with direct evidence that Origin had deprived
Plaintiffs of such reimbursements, Origin senior management merely responded ‘that’s
unfortunate.’” (Am. Compl. ¶ 135.) Origin made no attempt to resolve Dr. Alexander’s
issues, and it committed falsehoods regarding submission histories and the client center,
“despite possessing an admitted awareness that Plaintiffs had millions of dollars in
‘unclean claims’ in a que Origin had instant access to.” Plaintiffs also allege the “acts of
Origin were done willfully, maliciously, outrageously, deliberately, and purposely with
the intention to inflict emotional distress” and as a direct and proximate result of Origin’s
acts, “Dr. Alexander incurred severe and grievous mental and emotional suffering and
continues to suffer from such, including severe depression.” (Id. at ¶¶ 134-136.)
Origin argues that Dr. Alexander failed to allege extreme and outrageous conduct
as required to maintain a claim of intentional infliction of emotional distress. The
requirements to prove the elements of this tort are rigorous. The conduct giving rise to a
claim of intentional infliction of emotional distress must exceed all bounds usually
tolerated by a decent society and cause mental distress of a very serious kind. Cullison v.
Medley, 570 N.E.2d 27, 31 (Ind. 1991); AutoXchange.com, Inc., v. Dreyer & Reinbold,
Inc., 916 N.E.2d 40, 52 (Ind. Ct. App. 2004) (noting that an intentional infliction of
emotional distress claim will be sustained only if the conduct is “so outrageous in
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character, and so extreme in degree, as to go beyond all possible bounds of decency, and
to be regarded as atrocious, and utterly intolerable in a civilized society.”). A party must
allege conduct that would cause “an average member of the community” to cry
“Outrageous!” upon hearing the conduct. Gable v. Curtis, 673 N.E.2d 805-7, 810 (Ind.
Ct. App. 2001); Conwell v. Beatty, 667 N.E.2d 768, 777 (Ind. Ct. App. 1996).
At this stage, Dr. Alexander need not prove his claim, but merely must state a
plausible claim for relief. Although this is a close call, the court finds Dr. Alexander has
successfully done so. The Amended Complaint states that, as a result of Origin’s willful,
deliberate, and purposeful actions, Dr. Alexander suffers emotionally and is severely
depressed. This is understandable given the monetary loss alleged – $25,000,000.
Origin’s motion for partial judgment on the pleadings on Plaintiffs’ intentional infliction
of emotional distress claim is DENIED.
G. Count XI, Tortious Interference with Business Relations
To establish a claim for tortious interference with business relations, a plaintiff
must show: (1) the existence of a valid business relationship; (2) the defendant’s
knowledge of the existence of the relationship; (3) the defendant’s intentional
interference with that relationship; (4) the absence of justification; and (5) damages
resulting from the defendant’s wrongful interference with the relationship. Columbus
Med. Servs. Org., LLC v. Liberty Healthcare Corp., 911 N.E.2d 85, 94 (Ind. Ct. App.
2009). Additionally, the Indiana Supreme Court has affirmed that “this tort requires
some independent illegal action.” Barzauskas v. Fort Wayne-South Bend Diocese, Inc.,
796 N.E.2d 286, 291 (Ind. 2003).
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Plaintiffs allege “[t]he acts of Origin as described herein were intentional and
willful acts, were calculated to cause damage to Plaintiffs in [their] lawful business, were
done with the unlawful purpose of causing damage and loss to Plaintiffs, and were done
without right or justifiable cause on the part of Origin.” (Am. Compl. ¶ 138.)
Origin contends that the Plaintiffs did not plead the “illegality” requirement of this
claim. However, Plaintiffs respond that their allegations of tortious acts, including fraud,
meet the requisite unlawfulness element in dispute. As in Reginald Martin Agency v.
Conseco Med. Ins. Co., this court agrees that Plaintiffs’ allegations of fraud, if proved,
could satisfy the illegal conduct element. 388 F. Supp. 2d 919, 931-2 (S.D. Ind. 2005).
Therefore, Origin’s motion for partial judgment on tortious interference with
business relations is DENIED.
H. Count XII, Negligence
In Indiana, the elements of a negligence claim are: (1) a duty owed to plaintiff by
defendant, (2) breach of duty by allowing conduct to fall below the applicable standard of
care, and (3) a compensable injury proximately caused by defendant’s breach of duty.
Pisciotta v. Old Nat’l Bancorp, 499 F.3d 629, 635 (7th Cir. 2007).
Plaintiffs allege Origin owed a duty to Plaintiffs in performing the implementation
of the software and services pursuant to both agreements, to exercise the ordinary degree
of care expected of electronic healthcare vendors who provide such to healthcare
providers. (Am. Compl. ¶ 143.) Plaintiffs also allege Origin breached that duty by,
amongst other actions, recommending Plaintiffs invest in Origin’s software and services;
representing the software and services would serve Plaintiffs’ needs; and failing to advise
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that Origin did not possess the requisite experience to provide Plaintiffs the version of the
software and services purchased by Plaintiffs under both agreements. (Id. at ¶ 144.) As a
direct and proximate result of Origin’s negligence, Plaintiffs suffered damages in excess
of $25,000,000. (Id. at ¶ 145.)
Origin argues that Plaintiffs’ tort claim for negligence is precluded by the
economic loss rule. Under the economic loss rule, “contract is the sole remedy for the
failure of a product or service to perform as expected.” Gunkel v. Renovations, Inc., 822
N.E.2d 150, 152 (Ind. 2005). The rule “reflects that the resolution of liability for purely
economic loss caused by negligence is more appropriately determined by commercial
rather than tort law.” Indianapolis-Marion County Library v. Charlier Clark & Linard,
P.C., 929 N.E.2d 722, 729 (Ind. 2010). Economic loss occurs when there is “no personal
injury and no physical harm to other property,” and is defined by Indiana courts as “the
diminution in the value of a product and consequent loss of profits because the product is
inferior in quality and does not work for the general purposes for which it was
manufactured and sold. Economic loss includes such incidental and consequential losses
as lost profits, rental expense, and lost time.” Gunkel, 822 N.E.2d at 153-4.
Plaintiffs’ negligence claim sounds in contract, not in tort. The alleged breach of
duty relates to whether the products and services that were the subject of the parties’
contracts performed as expected. Plaintiffs seek monetary damages and lost profits, not
personal injury or property damages. Origin’s motion for partial judgment on the
pleadings is GRANTED.
I. Count XIII, Violation of Lanham Act
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In Count XIII, Plaintiffs bring a claim for violation of § 1125(a), the Lanham
Trademark Act of 1946 (“Lanham Act”). The purpose of this Act is to protect persons
engaged in commerce against unfair competition. 15 U.S.C. § 1051 et seq.; 124 A.L.R.
Fed 189. The Lanham Act creates civil liability for deceptive advertising, as Section
1125(a) provides:
(1) Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or
device, or any combination thereof, or any false designation of origin, false
or misleading description of fact, or false or misleading representation of
fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the
affiliation, connection, or association of such person with another person,
or as to the origin, sponsorship, or approval of his or her goods, services, or
commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature,
characteristics, qualities, or geographic origin of his or her or another
person’s goods, services, or commercial activities.
U.S.C. § 1125(a)(1)(B).
Origin argues that Plaintiffs lack standing to bring a claim for a violation of 15
U.S.C. § 1125(a) because Plaintiffs are not competitors of Origin and therefore, are
outside the “zone of interests” protected by the Lanham Act. The zone of interests test is
a new development in Lanham Act standing analysis. See Lexmark Int’l, Inc. v. Static
Control Components, Inc., 134 S.Ct. 1377, 1388-89 (2014) (“The zone-of-interests test is
therefore an appropriate tool for determining who may invoke the cause of action in §
1125(a).”). To understand the Supreme Court’s holding, the facts of the case are helpful.

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The parties involved in Lexmark were both engaged in the toner cartridge industry.
Lexmark manufactured its own toner cartridges for use in its laser printers; Static Control
manufactured toner and component parts necessary in the remanufacture of Lexmark
cartridges. Id. at 1383-84. In an effort to curb the secondary market for its toner
cartridges, Lexmark introduced a “Prebate” program, which enabled customers to
purchase new toner cartridges at a 20% discount if they would agree to return the
cartridge to Lexmark once it was empty. Id. at 1383. To enforce the terms of the
Prebate, Lexmark installed a microchip to disable the cartridge after it ran out of toner.
Id. at 1383. Thus, for the consumer to use the cartridge again, the consumer had to go to
Lexmark to have the microchip replaced. Id. Static Control then developed a microchip
that could mimic the microchip in Lexmark’s cartridges, thus enabling remanufacturers to
refurbish and resell Lexmark Prebate cartridges. Id. at 1384. A lawsuit ensued, the issue
turning on whether Static Control had standing to sue Lexmark for false advertising
under the Lanham Act. The Supreme Court granted certiorari due to a circuit split on the
appropriate standing analysis.
Relevant for purposes of this case is the fact that, although Lexmark and Static
Control were not direct competitors, they were competitors nonetheless. In other words,
Static Control was within the zone of interests the Lanham Act was meant to protect. “A
consumer who is hoodwinked into purchasing a disappointing product may well have an
injury-in-fact cognizable under Article III, but he cannot invoke the protection of the
Lanham Act.” Id. at 1390. “Even a business misled by a supplier into purchasing an
inferior product is, like consumers generally, not under the Act’s aegis.” Id.
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Here, Plaintiffs are not within the zone of interests of the Lanham Act. Instead,
they are consumers who allege injury due to Origin’s software and support services.
Accordingly, Plaintiffs lack standing to bring Count XIII. Origin’s motion for judgment
on the pleadings on Plaintiffs’ § 1125(a) Lanham Act claim is GRANTED.
IV.

Conclusion
For the reasons set forth above, the court GRANTS in part and DENIES in part,

Origin’s Motion for Partial Judgment Pursuant to Rule 12(c) (Filing No. 72).
Specifically, Defendant’s Motion is GRANTED with respect to Counts V, VIII, XII, and
XIII, and DENIED with respect to Counts I, II, VII, and XI.

SO ORDERED this 1st day of December 2014.
__________________________________
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
Southern District of Indiana

Distributed Electronically to Registered Counsel of Record.

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